Breaking down the new 5% remittance tax: What every Indian in the US needs to know

A new US bill is sending shockwaves through immigrant communities. The proposal? A 5% excise tax on every dollar sent abroad. For India’s vast diaspora—especially the 2.3 million Indians working in the US—this isn’t just another policy update. 

It’s a direct hit on families, investments, and the very lifeline that connects them back home.

In 2023 alone, Indians in the US sent over $23 billion to support loved ones, invest in property, and fund businesses. But if this bill passes, every remittance will come with a costly new price tag.

What does this mean for Indian families? Let’s break it down.

Example 1: Monthly family support
Imagine an Indian family in the US, sending $1,000 each month to parents in India. Under the proposed tax, $50 will now be skimmed off as tax. That’s $600 lost annually. To keep their parents’ monthly support at $1,000, they’ll have to send $1,052.63 instead—paying $52.63 more each time.

Example 2: Larger transfers for education or property
Bigger needs bring bigger losses. Sending $10,000 for a child’s education or a property purchase? Prepare to lose $500 in tax. To make sure India receives the full $10,000, the sender would need to wire $10,526.32, swallowing an extra $526.32 in taxes.

Example 3: Impact on smaller, regular transfers
Even smaller, routine transfers aren’t spared. An NRI sending $200 a month will see $10 vanish as tax each time. Over a year, that’s $120 lost—money that could have covered groceries, medicines, or utilities back home.

The proposed tax casts a wide net. It applies not only to wage earners on H-1B or F-1 visas but reportedly also to green card holders and NRIs earning from investments or stock options in the US. Crucially, there’s no exemption for small transfers—every dollar faces the 5% cut.

Given that remittances from the US make up 28% of India’s total inflows ($32–33 billion annually), this tax could siphon off $1.6–1.7 billion from Indian households and businesses.

This isn’t pocket change—it affects education, healthcare, even families’ ability to pay rent or EMIs.

Experts warn of potential double taxation, as these funds have already been taxed as income in the US. Worse, there’s no clarity on whether NRIs will receive tax credits for these remittance deductions.

The ripple effects could be severe:

• Reduced NRI investment in Indian real estate and financial markets
• Lower remittance volumes impacting India’s foreign exchange reserves
• A possible shift to informal, riskier channels like hawala

Real estate developers, especially in cities like Mumbai, Delhi, and Hyderabad, fear a slowdown as NRI money becomes more expensive to send. For sectors reliant on diaspora funds, this tax could dampen demand and disrupt business plans.

With a potential rollout by July 2025, NRIs are being advised to accelerate any large transfers before the tax kicks in. Those with regular remittance obligations may need to rethink their transfer strategies—adjusting amounts, frequencies, or even exploring alternative financial tools.